The Incorporated Owners of Chungking Mansions v. Shamdasani Murli Pessumal James Kin-fung Fung & Adrlan Kin-chiu Fung

CACV 416/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL 

civil APPEAL NO.416 of 2002 

(ON APPEAL FROM LDBM498 of2001, LDBM500 of2001, LDBM501 of 2001, LDBM503 of 2001, LDBM505 of2001, LDBM506 of 2001, LDBM511 of 2001, LDBM512 of 2001, LDBM513 of 2001, LDBM515 of2001, LDBM516 of 2001, LDBM527 of 2001, LDBM528 of 2001 and LDBM529 of2001)

_______________________

BETWEEN

________________________

Before Hon Woo VP, Yeung JA & A Cheung J in Court

Date of Hearing:  4 June 2004

Date of Judgment: 4 June 2004

Date of Handing Down of Reasons for Judgment: 11 June 2004

___________________________

REASONS FOR JUDGMENT

___________________________

Hon Yeung JA (giving reasons for judgment of the Court):

1.On the 4 June 2004, we dismissed the appeal by the Incorporated Owners of Chungking Mansion (the Applicant). We indicated that we would give our reasons in writing and this we now do.

2.Multi-storey buildings are common in Hong Kong. Owners of individual units in such buildings own equal undivided shares of the buildings with the right to the exclusive use, occupation and enjoyment of their units.

3.Primarily, the deed of mutual covenant of the building regulates the rights and obligations of the owners, including the obligation to pay for the costs and outgoings in connection with the management and maintenance of the building.

4.In the absence of any deed of mutual covenant or when the deed of mutual covenant makes no relevant provisions, there would be statutory provisions under the Building Management Ordinance, Chapter 344 (the Ordinance) to regulate such rights and obligations.

5.Section 20 of the Ordinance deals with the contribution of funds from owners to defray costs and outgoings in respect of the management and maintenance of multi-storey buildings.

6.Section 21(3) of the Ordinance provides:

“A management committee may increase the amount required to be contributed by the owners to the extent to which the fund established and maintained under section 20 are insufficient to meet any payment due by the corporation in respect of cost of complying with-

(a)…; or

(b)     any notice, order or other document served upon the corporation in relation to the common parts by a public officer or public body under any Ordinance.”

7.Section 22 of the Ordinance further provides:

“(1) The amount to be contributed by an owner towards the amount determined under section 21 shall be -

(a)     fixed by the management committee in accordance with the deed of mutual covenant (if any);

(b)     payable at such times and in such manner as the management committee may determine.

(2) If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective shares of the owners.”

8.Chungking Mansion (the building), situated at Nathan Road, Tsimshatsui is one of such multi-storey buildings. It was built in the early 1960s for both commercial and residential uses. It has five blocks, each consisting of 18-storeys with a basement.

9.The building comprises of a total of 917 units (or notional units). The basement is deemed to consist of 40 units, each of the shops Nos. 1 to 5 on the ground floor, 4 units; each of the shops Nos. 6 to 11 on the ground floor and Shop No. 6 on the 1^st floor, 2 units; and each of the other shops or flats, 1 unit.

10.Each of the 917 units in the building is given one equal undivided share and 3 equal undivided shares are given to the roof, making a total of 920 shares.

11.Under the Deed of Mutual Covenant of the building (the DMC), expenses incurred in connection with the maintenance and management of the building are divided into six (6) categories, namely:

1.     Expenses for the entire building to be shared by all the owners according to the number of units they own, excluding those of the roofs (Clause 4);

2.     Expenses for the basement to be shared by owners of the units in the basement only according to the number of units they own (Clause 5);

3.     Expenses for the ground, first and second floors to be shared by owners of the shops on the ground, first and second floors only according to the number of units they own (Clause 6);

4.     Expenses for the first and second floors to be shared by owners of the shops on the first and second floor only according to the number of unit they own (clause 7);

5.     Expenses for the 3^rd floor to the roof to be shared by owners of units on the 3^rd to 17^th floors only according to the number of units they own (Clause 8); and

6.      Expenses to be shared by the actual users according to the number of units owned by such users (Clause 9).

12.The expenses under Clause 4 (category 1) include:

“(a)  The Crown Rent;

(b)  The keeping in good and tenantable repair of the foundation, side walks, scavenging lanes, supports beams, gutters, fences, chimney, drains and the well…;

(c)  The wages of the general caretakers and his assistant and watchmen employed for the entire building;

(d)  The disposal of garbage from all floors or the building and the cleaning of all parts of the building in common use;

(e)  Electricity charges, wages, and other expenses of operating, maintaining, repairing and reinstating the fire fighting equipment and pumps; and

(f)   The rebuilding or re-instatement of the said building or any part thereof so far as the same may be destroyed or damaged.”

13.The expenses under Clause 5 (category 2) include:

“(a)    The expenses of keeping in good and tenantable repairs the ramps, staircases landings and passages in the basement; and

(b)    The electricity charges and other expenses for the lighting of the said ramps, staircases landings and passage in the basement.”

14.The expenses under Clause 6 (category 3) include:

“(a)    The expenses of keeping in good and tenantable repair of the staircase landings and passages on the ground, first and second floors; and

(b)    Electricity charges and other expenses for the lighting of all parts of the ground, first and second floors in common use.”

15.The expenses under Clause 7 (category 4) are confined to the expenses in connection with the operating, maintaining, repairing and reinstating the escalators.

16.The expenses under Clause 8 (category 5) include:

“(a)    The expenses of keeping in good and tenantable repair of the staircases landings and passages in each block from the third floor to the roof;

(b)    Electricity charges and other expenses for the lighting of the said staircases landings and passages in each block from the third floor to the roof;

(c)    The expenses of operating, maintaining, repairing and re-instating the lifts in each block; and

(d)    The wages of the lift attendants for the lifts in each block.”

17.The expenses under Clause 9 (category 6) include:

“(a)    The expenses of operating, maintaining, repairing and reinstating the electric pumps, water tanks and water pipes for supplying tap water;

(b)    The water charges payable to Government for supplying tap water; and

(c)    The electricity charges and other expenses of operating, maintaining, repairing and reinstating the electric pumps for supplying water to the flush systems and all plumbing apparatus intended for general service.”

18.The Applicant was formed and registered in 1972. For all intents and purposes, it takes the role of a management committee and is in charge of the management of the building.

19.The building was dilapidated and between November 1997 and June 1998, the Applicant received eight Government Orders, requiring it (as the management committee of the building) to carry out repairing/renovation works in the common areas and/or common parts of the building, namely:

1.     D/116/K/97: Repairing of loose and defective window frames and glazing in common area;

2.     DE57/K/97: Repairing or renewing of common drain;

3.     C/BM/1977/97/K: Removal of unauthorized building works on the external wall on podium floors and a chimney stack attached to the external wall at the re-entrant of Block D;

4.     CHP/CB/1135/98/K: Removal, building or reinstatement of structures in common areas on different floors of Blocks A, B, C, D, and E for fire safety reason;

5.     C1/43/01: Testing of communal electrical installation pursuant to Electricity (wiring) Regulations;

6.     FSD 145/98: Fire Service Installations and Equipment Requirements for Shopping Arcade;

7.     BDFS34/98: Installation of equipment or building of structures on 1/F to 2/F for fire safety reason; and

8.     FSD373/98: Installation of Fire Service Equipment on 1/F to 2/F.

20.In response to the aforesaid Government Orders, the Applicant duly convened an EGM of the owners of the building on 4 July 1998 and it was resolved that the repairing/renovation works required under the Government Orders were to be carried out.

21.In another EGM dated 19 November 2000, it was further resolved that the repairing/renovation works were to be undertaken by Leader Construction Company (Leader), which had submitted the lowest tender of $13,484,200 (the repair costs).

22.The Applicant proposed that owner(s) of each share should make an equal contribution of $14,657 towards the repair costs ($13,484,200 divided by 920 shares). Notices of demand were issued to each of the owners, demanding installment payments. The amount of the contribution from the owners was decided without reference to the relevant clauses in the DMC.

23.The repairing/renovation works, which commenced in March 2000, were completed in early 2002. However, 19 owners refused to make contributions towards the repair costs, despite repeated demands.

24.In August 2001, the Applicant commenced proceedings in the Lands Tribunal seeking to recover from the 19 owners their shares of the repair costs together with the legal costs incurred in enforcing the payment by way of registering charges on their properties under the DMC.

25.The case went before HH Judge Yung, the Judge sitting as a Presiding Officer in the Lands Tribunal. The judge concluded that the contribution sought by the Applicant from the 19 owners was not calculated on the correct basis.

26.The judge took the view that the works required under the Government Orders were within those stipulated under the relevant clauses in the DMC and the owners should share the repair costs in accordance with the relevant clauses and not equally according to the number of shares they held.

27.The judge dismissed the Applicant’s claim with costs and the charges against the owners’ properties were also discharged and vacated.

28.The Applicant appealed against the order of the judge.

29.Of the 19 owners who succeeded before the judge, only 14 owners remained in the case as the Applicant had filed notices of withdrawal against five of them.

30.The remaining 14 owners (respondents) were (R1) Shamdasani Mureli Pessuamal who owns 18 equal undivided shares, (R2) Fung Kin Fung who owns 1 shares, (R3) Ko Ng Hay Lun and Ko Fat who own 1 share, (R4) Koo Pak Chew who owns 1 share, (R5) Young Kam Gun and Wan Shiu Yuen who own 2 shares, (R6) Leung Siu Ming who owns 1 share, (R7) Hotu Ghanumal Buxani who owns 2 shares, (8) Leung Kwok Keung who owns 1 share, (R9) Cheng Chuen Eddie and Chan Sau Chu who own 1 share, (10) Lam Shuk Ngai who owns 2 shares, (R11) Au Wai Chun who owns 1 share, (R12) Kenery International Limited that owns 0.2713 share, (R13) Forever Profit Limited that owns 0.4668 share and (R14) Super Universe Investments Limited that owns 0.4544 share.

31.Notice of Hearing was not successfully served on R2, R9, R10, R12 and R13. Nevertheless R10 was present in court and he agreed to proceed with the appeal. The Court therefore allowed the appeal in connection with the respondents who had been successfully served and R10 to proceed whereas the appeal in connection with the other respondents was adjourned at the suggestion of Mr. Koo, counsel for the Applicant.

32.Mr. Koo, in support of the appeal, made a very simple point. He suggested thatnone of the repairing/renovation works required under the Government Orders fell within clauses 5, 6, 7, 8 or 9 of the DMC and that only part of them were covered by clause 4.

33.Mr. Koo argued that as the works were not covered by clauses 5, 6, 7, 8 or 9 of the DMC and were only partly covered by clause 4 (category 1 expenses), all owners, including the respondents, were liable to share the expenses in accordance with the resolution passed on 19 November 2000. Mr. Koo sought reliance on section 22(2) of the Ordinance.

34.Mr. Koo further pointed out that as the owner of the roof was not liable for any of the category 1 expenses, the amount of contribution due from the respondents would exceed $14,657 per share, i.e. the repair costs or such part thereof covered under clause 4 divided by 917 shares instead of 920 shares.

35.Mr. Koo therefore sought judgment against the respondents on the Applicant’s claims with interest and costs although he conceded that the claim against R1 should be correspondingly reduced as R1 was the registered owner of the roof and as such he was deemed to be holding 3 more shares, which were not chargeable to any category 1 expenses under clause 4 of the DMC.

36.It was clear that the Applicant’s case against the respondents rested entirely on the assumption that none of the works undertaken by Leader fell within clauses 5 to 9 of the DMC and were only partly covered by clause 4.

37.If any of the repairing/renovation works were covered by clauses 5 to 9, only those owners stipulated therein were liable to share the expenses incurred in connection with such works and the Applicant could not recover such expenses from the other owners of the building on the basis that was advanced, namely all 920 shares were to share the repair costs equally.

38.The judge found that at least some of the works undertaken by Leader were covered by clauses 4, 5, 6, and 8 of the DMC. The question was whether the judge was entitled to make such findings.

39.We had not been provided with details of the repairing/renovation works undertaken by Leader. However, at least some of the works stipulated under Order CHP/CB/1135/98/K clearly fell within the ambit of clauses 5, 6 and 8 of the DMC.

40.For the sake of completeness, the works under Order CHP/CB/1135/98/K are reproduced hereunder:

“Block A

“(a)     a metal gate, at the entrance of the structure (which is known as A10 on site) at each 8/F. and 15/F. swinging out onto the common corridor, and causing obstruction to the means of escape.

(b)    Structures erected inside the staircase enclosure on 2/F. (two nos.) and 10/F. (one no.) causing a fire hazard.

(c)    Removal of the fire resisting doors on 3/F. staircase exit leading to and from the podium.

(d)    Metal gate blocking the means of escape at staircase on 1/F.

(e)    Removal of part of the staircase and smoke lobby enclosure above the exit doors on 8/F. and 14/F. and removal of staircase enclosure to form a door opening on 3/F. causing a fire hazard.

Block B

(f)       Removal of part of the smoke lobby door on 8/F., 9/F., 11/F., 12/F., & 13/F.

(g)      Structures erected inside both of the staircases on G/F. and on 2/F., causing a fire hazard.

Block C

(h)      Removal of part of the staircase and smoke lobby enclosure wall above the exit doors on 7/F. to 11/F.

Block D

(i)       Removal of part of the staircase and smoke lobby enclosure above the exit doors on 15/F. & 16/F., causing a fire hazard.

(j)       Removal of part of the staircase enclosure wall on 4/F., causing a fire hazard.

(k)      Structures erected inside both of the staircases on G/F. and 2/F., causing a fire hazard.

Block E

(l)       Removal of part of the staircase and smoke lobby enclosure above the exit doors on 6/F. and 9/F., causing a fire hazard.

(m)     One set of smoke lobby door were removed on 2/F. and 14/F., causing a fire hazard.

(n)      A structure erected inside the staircase enclosure on G/F., causing a fire hazard.

Common item in Block B, C, D & E

(o)      Removal of fire resisting doors of the lift lobby from 3/F. to 16/F., causing a fire hazard.

(p)      Removal of the fixed wired glass windows within the staircase enclosure facing the lightwell, causing a fire hazard.”

41.We rejected Mr. Koo’s suggestion that the existence of illegal structures or the removal of fire resistance doors related to fire fighting only and would not render the staircases landings and passages not in a good and tenantable repair.

42.We were of the view that the existence of illegal structures and the removal of fire fighting doors in/from the staircases landings and passages meant that such staircases landings and passages were not kept in good and tenantable repair.

43.In the circumstance, the expenses required to rectify the situation should be shared by the owners of the building in accordance with clauses 5, 6 and 8 of the DMC and not equally by them according to the number of shares they held.

44.The burden rested on the Applicant to show that the respondents were liable to share the repair costs in proportion to their respective shares.

45.We were not persuaded that the Applicant had successfully done so.

46.The judge was right to find as he did that part of the works undertaken by Leader in fact were within clauses 5, 6, and 8 of the DMC.

47.The Applicant was therefore not entitled to compel all the owners of the building to contribute towards the repair costs on the basis that was advanced, namely that such costs were to be shared by the owners according to the number of shares that each of them held. The Applicant was only entitled to seek contribution from the owners at least partly in accordance with clauses 5,6 and 8 of the DMC.

48.The judge was correct to conclude that the contributions sought by the Applicant from the respondents were not calculated on a correct basis and that the Applicant’s claims against the respondents had not been properly made out.

49.In the circumstances, the appeal must be dismissed. As none of the respondents sought costs of the appeal from the Applicant, we made no order as to costs.

50.We would only add that our decision in this appeal does not preclude the Applicant from recovering from the respondents their contributions towards the repair costs if such contributions are calculated properly according to the DMC.

51.To avoid further unnecessary hearing, we also make an order nisi  dismissing the appeal against the other respondents, namely R2, R9, R12 and R13 who had not been served with the notice of hearing and who did not appear at the hearing of the appeal with no order as to costs. The order nisi would be made absolute 14 days after the handing down of the reasons for judgment.

Mr Ernest Koo instructed by Messrs Adrian Yeung & Cheng for the Applicant.